Mortgage rates fall for the second consecutive week

Mortgage rates are down again this week, after dropping nearly half a percentage point last week.

The 30-year fixed-rate mortgage averaged 6.58% in the week ending Nov. 23, down from 6.61% the week prior, according to Freddie Mac. A year ago, the 30-year fixed rate was 3 ,10%.

Mortgage rates rose for most of 2022, spurred by the Federal Reserve’s unprecedented campaign to raise interest rates to tame rising inflation. But last week, rates plummeted amid reports that inflation may have finally reached its peak.

“This volatility is making it difficult for potential home buyers to know when to enter the market, and this is reflected in the latest data showing a slowdown in existing home sales across all price ranges,” said Sam Khater, chief economist at Freddie Mac.

The average mortgage rate is based on mortgage applications Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who have put down 20% and have excellent credit. But many buyers who put less money up front or have less than perfect credit will pay more than the average rate.

Average weekly rates, typically released by Freddie Mac on Thursdays, are released a day early due to the Thanksgiving holiday.

Mortgage rates tend to track the yield on 10-year US Treasuries. When investors see or anticipate rate hikes, they make moves that boost yields and raise mortgage rates.

The 10-year Treasury has hovered in a lower range of 3.7% to 3.85% since a pair of inflation reports that indicated prices rose at a slower-than-expected pace in October they were published almost two weeks ago. That has led to a big reset in investor expectations about future interest rate hikes, said Danielle Hale, chief economist at Realtor.com. Previously, the 10-year Treasury had risen above 4.2%.

However, the market may be a little too quick to celebrate improving inflation, he said.

At the November Fed meeting, Chairman Jerome Powell stressed the need for continued rate hikes to tame inflation.

“That could mean that mortgage rates could go up again, and that risk increases if next month’s inflation reading is on the upside,” Hale said.

While it’s hard to time the market to get a low mortgage rate, many would-be home buyers are seeing a window of opportunity.

“Following generally higher mortgage rates throughout 2022, the recent swing in favor of buyers is welcome and could save the buyer of an average priced home more than $100 a month than they would have paid when the rates were above 7% just two weeks ago,” Hale said.

Following the decline in mortgage rates, applications to buy and refinance increased slightly last week. But refinancing activity is still more than 80% below last year’s pace, when rates were around 3%, according to the Mortgage Bankers Association’s weekly report.

However, with weekly mortgage rate swings averaging nearly three times those seen in a typical year and home prices still historically high, many potential buyers have balked, Hale said.

“A shortage of long-term housing keeps home prices high, even as the number of homes on the market for sale has increased and buyers and sellers may find it more difficult to align price expectations,” he said.

In a separate report released Wednesday, the US Department of Housing and Urban Development and the US Census Bureau reported that new home sales rose in October, rising 7.5% from September. but they decreased by 5.8% compared to a year ago.

While it was higher than expected and bucked the trend of declining sales recently, it is still lower than a year ago. Home construction has been historically low for a decade and builders have pulled back as the housing market shows signs of slowing down.

“New home sales beat expectations, but a reversal of the overall downward trend is doubtful for now, given high mortgage rates and pessimism from developers,” said Robert Frick, business economist at the Navy Federal Credit Union .

Despite a general trend of declining sales, new home prices remain at record highs.

The median price for a newly constructed home was $493,000, up 15%, from a year ago, the highest price on record.

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